Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Muted as China’s Economy Predicted to Slow
The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained flat, leaving the pairing trading around AU$1.9391.
The Australian Dollar remained flat against the Pound as the World Health Organization (WHO) stated the number of Covid-19 cases was not rising at a dramatic rate.
WHO also added that there was there was not a major shift in the virus’ mortality or severity pattern.
The number of new cases in China rose by 5,090, and the death toll jumped by 121.
Meanwhile, Reuters economists expect that the Chinese economy will grow at its slowest rate since the financial crisis.
However, they also believe that this downturn will be short-lived if the coronavirus is contained. This would be positive for the ‘Aussie’ due to the strong trade links between the two countries.
According to Freya Beamish, chief Asia economist at Pantheon:
‘Nobody knows the damage China’s virus containment efforts will have on growth, and we probably never will for sure, given the opacity of the statistics. We reckon true GDP growth will fall below 2% in Q1, from 4.0% in Q4, which already was substantially lower than the official 6.0%.
‘The lost production probably will be made up over the remainder of this year. But some service sector activity simply will be lost.’
Yesterday: Pound (GBP) Jumps After Chancellor Javid’s Resignation
Sterling received an upswing of support on Thursday following the shock resignation of British Chancellor Sajid Javid.
However, this could do little to boost GBP against the ‘Aussie’ on Friday, as the pairing remained flat.
During Prime Minister Boris Johnson’s cabinet reshuffle, the former chief secretary to the Treasury, Rishi Sunak was appointed to the role.
As Sunak is an ultra-loyalist to the Prime Minister, investors expect he will have a tighter grip on the Treasury.
Markets now expect that the upcoming budget will see an increase in public spending, boosting the British currency.
Commenting on this, Paul Dales of Capital Economics said:
‘We already thought that the Budget on 11th March would involve an extra loosening in fiscal policy worth 0.5% of GDP, which coming on top of the extra government spending announced in September 2019 would mean a fiscal boost of 1.0% is in the pipeline. It’s now possible that the Budget will provide a bigger bang.’
Pound Australian Dollar Outlook: RBA Meeting Minutes in Focus
Looking ahead, the Australian Dollar (AUD) could reverse losses against the Pound (GBP) if risk appetite declines.
If traders become overly cautious about the outbreak of Covid-19, the risk-sensitive ‘Aussie’ will slump.
Meanwhile, at the start of Tuesday’s session AUD could fall further following the release of the Reserve Bank of Australia’s (RBA) meeting minutes.
If RBA policymakers were overly dovish during February’s monetary policy meeting, the Pound Australian Dollar (GBP/AUD) exchange rate will edge higher.